Sebi Simplifies Format of Offer Documents for Mutual Funds

To enhance the ease of preparation of the Scheme Information Document (SID) by mutual funds and make it more readable for investors, the Securities and Exchange Board of India (Sebi) has simplified and rationalized the format of offer documents. This move is aimed at streamlining the dissemination of relevant information to investors, rationalizing the preparation of SID, and facilitating its periodic updation by mutual funds.

Revamped Format

The revamped format will be implemented with effect from April 1, 2024. The decision to revamp the format of SID was based on the suggestions of the industry body AMFI and the recommendations of Sebi's Mutual Fund Advisory Committee.

Modifications

Under the modifications, the schemes' portfolio holdings, including the top 10 holdings by the issuer and fund allocation toward various sectors, will be disclosed through a functional web link where such data will be hosted. Additionally, certain disclosures about the aggregate investment in the scheme by AMCs' boards of directors and other key personnel will be provided in the Statement of Additional Information (SAI) of the MF scheme.

The creation of a segregated portfolio will be optional and at the discretion of the AMC. It should be created only if the SID of the scheme has an enabling provision for a segregated portfolio with detailed disclosures made in the SAI. All new schemes shall have the enabling provision included in the SID for creating a segregated portfolio.

Risk-O-Meter Disclosure

Asset Management Companies (AMCs) will have to disclose the risk-o-meter of the benchmark on the front page of the initial offering application form, SID, Key Information Memorandum (KIM), and common application form, along with the information about the scheme.

Changes in KIM and SAI Formats

In line with the new SID format, Sebi has asked AMFI to carry out the necessary changes in the formats of KIM and SAI in consultation with it within two months.

The simplification and rationalization of the SID format by Sebi are significant steps toward enhancing the ease of preparation of offer documents for mutual funds and increasing their readability for investors. These changes will streamline the dissemination of relevant information, making it easier for investors to make informed decisions about their investments.